Workshop%20on%20Business/Management%20Studies

1
Workshop on Business/Management Studies

• Last Updated June 6, 2002
• Instructor
• Hirao KOJIMA
• Doctor of Economics, Kyushu University,
  Fukuoka, Japan, 1995.
• Doctoral Student, UCLA, Graduate School of
  Management (Finance Department), Los Angeles,
  USA, 1979-1982.
• Master of Business Administration (M.B.A.),
  Carnegie Mellon University, Pittsburgh, USA,
  1979.

2
Corporation in a Society/Environment

• Society/Environment, surrounding a corporation
• Corporate system
• Input -gt Manufacturing Process -gt Output -gt
  Customers/Stockholders, etc.
• Input here includes managerial resources (see the
  next slide), etc.

3
Managerial Resources of a Firm

• Three Tangible Resources
• Physical
• Buildings, etc.
• Financial
• Cash, etc.
• Human
• Workers, Managers
• Intangible Resources Informational Resources
• Marketing Know-how
• Research and Development Capabilities, etc.

4
Functions/Departments of a Manufacturing/Nonmanufa
cturing Firm

• Marketing
• Research and Development
• Production
• Accounting and Finance
• Personnel
• Information Technology/System
• Legalities
• Note Well proceed from here roughly in this
  order.

5
Marketing Management lt1gt What is Marketing?

• Bidirectional information flows in a marketing
  system
• Market information from market to company
• Very initial information flow
• Market research to discover unmet needs in the
  market
• Product information from company to market
• Subsequent information flow
• Sales promotion and advertising of products newly
  manufactured to meet the needs
• Application Convenience for who?
• The convenience store market

6
Marketing Management lt2gt Marketing Analysis -
The 3Cs

• Before research and development of a new product,
  a company must analyse three factors in its
  marketing environment
• Customers(/Consumers/Stockholders) Three
  questions to investigate are
• Competitors in all the related industries Three
  main areas to study are
• Company itself Three major items crucial for
  the internal analysis are
• A rigid analysis should lead to a better
  understanding of the SWOT (strengths, weaknesses,
  opportunities, threats).
• Application PC war
• The personal computer industry

7
Marketing Management lt3gt Segmentation,
Targeting, Positioning

• Segmenting a maket into several customer groups,
  based on
• Demographic/geographic/lifestyle-related
  differences
• Product-related differences
• Target marketing Three factors to consider when
  choosing and targeting one or more of the
  segments are
• Product positioning Three factors to consider
  when positioning a product are
• Positioning map for PC market
• Application Fly me!
• The airline industry

8
Marketing Management lt4agt The Marketing Mix -
The 4Ps

• A companys marketing program consists of the
  marketing mix of four elements ( 4Ps )
• Product
• Place
• Promotion
• Price
• Note that cutomrer needs are in the center
  surrounded by all these 4Ps See the diagram on
  p.62 of the text.

9
Marketing Management lt4bgt The Marketing Mix -
The 4Ps

• Product A set of benefits provided to the
  customers
• Tangible features
• Physical item
• Packaging
• Intangible features
• Customer service
• Company reputation
• Brand name
• Place Distribution channels
• Wholesale channel Company -gt wholesalers -gt
  Retailers
• Retail channel Retailers -gt Customers
• Direct channel (Internet, etc.) Company -gt
  Customers

10
Marketing Management lt4cgt The Marketing Mix -
The 4Ps

• Promotion
• Objective
• To increase the awareness of the product and
  create interest in purchasing it
• Advertising (see Marketing Management lt1gt What
  is Marketing?)
• Sales promotion (same as above)
• Public relations
• Personal selling

11
Marketing Management lt4dgt The Marketing Mix -
The 4Ps

• Price
• The pricing strategy takes into account
• A companys goals
• The actions of competitors
• Examples of pricing strategies
• Penetration pricing strategy (low initial price
  leading to higher sales) for
• Companys goalTo establish a strong market
  share quickly
• Skimming pricing strategy (high initial price
  leading to higher profits) for
• Companys goalTo maximize profits in the
  short-run
• Application Lets go tropical!
• The marketing mix of a package tour to a tropical
  island targeting young single working women

12
Research and Development

• After analysing those 3Cs in its marketing
  environment, the company starts working on the
  research and development of new product(s) that
  would meet customer needs.
• 3Cs Customers, competitors, company
• See Marketing Management lt2gt Marketing Analysis
  - The 3Cs.

13
Production Management

• Once a product has been newly developed that will
  most likely satisfy customers unmet needs, the
  company moves on to its production.
• Technical/Quantitative Features of Production
  Mgmt.
• Japanese Style of Manufacturing Process
• Just-in-time method (Kanban method)
• Quality Control (Kaizen)
• Computerized Manufacturing System
• Production Abroad (For outsourcing abroad, see
  p.38 of the text, for instance)

14
Financial Management Accounting and Finance lt1gt

• Three crucial pieces of financial information
• The income statement The profit and loss (P/L)
  statement
• The balance sheet (BS)
• The cash flow statement (CF)
• P/L A set of flow data profit, revenue
  generated and expesnses incurred for a certain
  period of time
• Profit Sales Revenue - Costs
• To be maximized (for stockholders)
• BS A set of stock data assets, etc.
  accumulated until a given point in time
• AssetsLiabilities Owners Equity
• Assets are financed through debt and equity.
• Liabilities Debt capital
• Owners Equity Equity capital
• CF (See lt4gt.)

15
Financial Management Accounting and Finance lt2gt

• P/L
• What does it look like?
• Sales
• Expenses
• Four levels of profit
• Gross profit
• Operating profit
• Ordinary profit
• Net profit
• Example(s)
• Matsushita
• Application Not all profits are created equal!
• What is the most important profit number?

16
Financial Management Accounting and Finance lt3gt

• BS
• What does it look like?
• Assets
• Financed through debt and equity.
• Liabilities
• Owners equity
• Example(s)
• Matsushita
• Application Is your company healthy?
• The company should be liquid enough
• How liquid? Measure it by (net) working capital
  current assets - current liabilities.
• The company should not rely too much on debt to
  finance its assets Its leverage shold be low
  enough.
• In other words, equity ratio should be high
  enough to minimize the default risk!

17
Financial Management Accounting and Finance lt4agt

• The cash flow statement
• A list of the cash inflows and outflows observed
  for a certain length of period
• Cash inflowsDecrease in assets increase in
  liabilities or equity
• Cash outflows Increase in assets decrease in
  liabilities or equity
• Why bother with cash flow?? How much cash a
  company has determines its repayment ability,
  i.e., its default/bankruptcy risk.
• Divided into 3 sections operating investting
  financing
• 1st section Cash inflows and outflows that occur
  in the companys operating activities
• InflowsNet profit depreciation (non-cash
  expense item) decrease in inventory increase in
  accounts payable etc.
• Outflows Increase in accounts receivable
  decrease in current portion of long-term debt
  etc.

18
Financial Management Accounting and Finance lt4bgt

• 2nd section Those that occur in the investting
  activities
• OutflowsPurchases of property, plant and
  equipment (PPE) acquisitions of other
  businesses etc.
• 3rd section Those that occur in the financing
  activities
• InflowsSale of stock etc.
• OutflowsDecrease in long-term debt dividend
  payment etc.
• What does it look like? See p.116 of the text.
• Example(s)
• Matsushita
• Application Cash flows -- In and out!
• Profit and yet negative cash flow, Loss and
  yet positive cash flow This is partly due to
  non-cash expense items( like depreciation).

19
Financial Management Accounting and Finance lt5agt

• The time value of money for investment decisions
• Thinking of investing money in a project (like
  purchasing a new equipment), a company expects a
  cash flow from the project during a future period
  of time (like over the next 10 years).
• Investment decisionShould the firm invest money
  in the project?
• The decision requires computing the time value of
  money, since a dollar tomorrow is worth less than
  a dollar today.
• How to make investment decisions Three things to
  take into account
• Initial costCash to be paid today for the new
  equipment costs associated with starting out new
  hiring, training ,etc.
• Future cash flowA series of cash inflow/outflow
  at evry future point in time
• Discount rate (to discount the value of future
  cash flow)

20
Financial Management Accounting and Finance lt5bgt

• How to make investment decisions ltagt Net present
  value (NPV) method
• NPV Discounted value of future cash flow -
  Initial cost
• If NPV gt lt 0, then the project is accepted
  rejected.
• How to make investment decisions ltbgt
• Internal rate of return (IRR) method To compute
  the discount rate that lead to a zero NPV.
• Payback period method To compute the number of
  periods required to revover the initial cost of
  the project.
• Application Back to the present!
• An example of NPV method

21
Personnel/Organizational Management Human
Resources and Organization lt1gt

• Corporate culture
• Recognize and create strategies to deal with
  cross-country or inter-firm differences with
  respect to
• Degree of risk-takingRisk-lovers risk-averters
  risk-neutralists
• Speed of decision-making Fast (risk-taking)
  slow (risk-averse)
• How to delegate authority Based on ability?
  seniority?
• Application Mission completed
• Imagine youre a Japanese employee of a company
  that has been recently acquired by an American
  company. What is its corporate culture like?

22
Personnel/Organizational Management Human
Resources and Organization lt2gt

• Performance-based system ( Merit system)
• Seniority system versus performance-based system
• Pros and cons (advantages and disadvantages) of
  performance-based system are
• Application A mixed bag?
• While many Japanese companies are now moving more
  towards a performance-based system, some are
  instituting a hybrid (performance/seniority)
  system to gradually introduce change into the
  firm.
• Such a hybrid system is difficult to implement
  and maintain, though Confusion and conflict.

23
Personnel/Organizational Management Human
Resources and Organization lt3gt

• Discrimination in the workplace regarding
• Sex
• Age
• Race
• Disability The disabled (with physical or mental
  disabilities)
• Drawbacks of discrimination are how to prevent
  it includes
• Application Illegal and expensive!
• Working to alleviate (ease) discrimination
  throughout the organization makes good business
  sense.

24
Personnel/Organizational Management Human
Resources and Organization lt4gt

• Business ethics
• Ethical dilemmas To choose between
• Doing what is morally right (operating within
  the rule of ethics)
• Versus doing what is expedient (operating within
  the rule of law)
• expedientuseful in a particular situation, but
  sometimes not morally acceptable
• Two key principles for companies to be ehtical
  Transparency and accountability (Be responsible
  for the stakeholders! -- See Slide Innovative
  Vision lt3agt Corporate Governance.)
• Making secretive decisions behind closed doors -gt
  Less transparent
• Symbolic resignation -gt Less accountable for
  illegal or unethical actions
• Application Doing the right thing
• Is it profitable to be ethical in business?
  Short run vs long run.

25
Strategic Management Strategy lt1gt

• Industry analysis
• Five basic forces that, combined together,
  determine both the profit potendial of an
  industry as well as the stragey of a company in
  that industry
• If you are a supplier, your bargaining power is
  strong if see p.222.
• If you are a buyer, your bargaining power is
  strong if see p.222.
• Threat of new entrants Barriers to entry include
  see p.224.
• Threat of substitute products Mobile phones with
  Internet capability vs portable PCs see p.224.
• Excisting competition in the industry is keen if
  see p.224.
• Application PC war--A second look
• Five forces at work in the personal computer
  industry are

26
Strategic Management Strategy lt2gt

• Competitive advantage
• Establish a clear point of differentiation
  between your company and the competitor for
  strategic positioning (to position your company
  in a unique or different way from your
  competitors. (See Positioning Map on p.46.)
• Differentiation with regard to
• Brand image
• Unique features
• Proprietary technology (the one which is
  developed and used solely by a company which can
  legally do so and whose name is attached to the
  technology)
• Superior customer service
• Product/customer niche For niche, see p.30.
• Competitive advantage must be sustainable for it
  to be successful in the long run.
• Sustainability In the long term, the
  competitors should find it difficult to copy you.
  (Otherwise, competitive advantage would be lost
  after a while.)
• Application Going direct
• Direct from company to customers See p.60, too.
• Direct vs traditional (indirect) channels
  Pricing conflicts, etc.

27
Strategic Management Strategy lt3gt

• Global strategies Two key questions to be
  addressed
• Which foreign markets should we enter? For
  example, what would induce you to enter the
  Chinese market rather than the German market?
  Consider
• Geographic/psychic proximity
• Market potential
• Competitive advantage
• Risk
• How should we enter the markets?
• Exporting
• Licensing-in, -out (technology transfer)/joint
  venture (NUMMI in US, 1983Toyota and GM)
• Direct investment
• Establishing a manufacturing/marketing
  subsidiary(ies) abroad
• Adaptation of the marketing mix (see pp.57-71) to
  the local (foreign) market may be needed.
• Application Growing fast
• Three reasons for successful business in Japan by
  the Western fast-food companies are

28
Strategic Management Strategy lt4agt

• Diversificaiton/synergy Three questions to be
  addressed
• Is the targeted industry attractive enough?
• Conduct the detailed industry analysis to study
  those five basic forces that, combined together,
  determine both the profit potendial of an
  industry as well as the stragey of a company in
  that industry. See pp.222-224.
• Is the cost of entry reasonable?
• Cost of entry includes
• Initial start-up costs
• First few yearss working capital/operating
  losses (working capitalnet w.c. p.106,
  operationg lossp.80)
• Ironically Higher cost of entry gt more
  attractive industry

29
Strategic Management Strategy lt4bgt

• Diversificaiton/synergy
• Is the company better off as a result of the
  diversificaiton?
• Is there a synergy effect? Diversification gt
  Reduced costs? Improved efficiencies?
• Consider an external diversifcation in which firm
  A acquires an outside firm B), would it be true
  that Value of Firm A Value of Firm B lt Value of
  Firm Diversified?
• Two basic methods of diversificaiton
• Internal diversification within the company
  Costly and time-consuming.
• External diversifcation Acquiring an outside
  firm Results are quickly obtained, but
  corporate- culture problems arise.
• Application Hard, soft orboth?
• Synergy between electronics (hardware) and
  entertainment (software)? Sony acquired CBS
  Redords (1988), Columbia Pictures (1989)
  Matsushita MCA (1990).

30
Innovative Vision lt1agt IT and Business (IT
Management)

• Direct channels (see ps. 60, 248)
• Online selling B2C (business to customer)
  application of the Internet
• Prices fall products may be customized to meet
  customer needs.
• B2C e-business (by UCLA Andersons alumni)
  Online university textbook sales
  sitehttp//www.bigwords.com/ wine
  auctionshttp//www.winebid.com/
• Luxury-type products, however, are better suited
  for traditional retail channels Quality comes
  first.

31
Innovative Vision lt1bgt IT and Business (IT
Management)

• Online bidding for supplier contracts B2B
  (business to business) application of the
  Internet
• The network of available suppliers is expanded
  from a local to a global basis.
• B2B e-business (by UCLA Andersons alumni)
  Global business consulting (Pricewaterhouse-Cooper
  s)http//www.pwcglobal.com/ Web-centric
  language serviceshttp//www.stanleymaria.com/
• Pros and cons of the Internet strategy p.294 of
  the text
• Application Cyber shopping
• Most successful online ventures tend to be
  service-oriented or commodity-based.
• Customers enjoying cyber shopping are more
  price-sensitive (than traditional shoppers).

32
Innovative Vision lt2gt Entrepreneurship

• Successful entrepreneurs in the past
• Edison, Matushita (http//www.matsushita.co.jp/cor
  p/company/person/en/index.html), Ibuka, Morita,
  etc.
• Entrepreneurial traits What makes for a
  successful entrepreneur?
• Risk-takers Thinking outside of the box being
  unconventional and innovative
• Nurturing entrepreneurship
• A societal focus is needed on rewarding high
  achievers and encouraging independent thinkers.
• At schools performance-based reward system at
  companies.
• Harold Price Center for Entrepreneurial Studies
  (at UCLA Anderson)http//www.anderson.ucla.edu/re
  search/esc/
• MBA course Corporate Entrepreneurshiphttp//www
  .anderson.ucla.edu/research/cmie/track/mgmt_295c.h
  tml
• Application Can you judge a book by its cover?

33
Innovative Vision lt3agt Corporate Governance

• Q1Who owns the company? Q2Who controls the
  company?
• Japan
• A1shareholders. (Recall that Owners Equity is
  equivalent to Stockholders Equity in the
  balance sheet see p.98 of the text.)
• A2managers
• Managements objective NOT really to maximize
  shareholders (short-term) wealth, but rather to
  continue to grow (expand the market share) over
  a long period of time, with short-run
  profitability being most likely sacrificed for
  long-run growth.
• Western nations A1A2shareholders. That is
• Ownership control
• Managements objective To maximize
  shareholders (short-term) wealth
• Strategy tends to be formulated on a short-term
  basis Qurterly profit projections are more
  important than long-term (like 5-year or longer)
  prosperity

34
Innovative Vision lt3bgt Corporate Governance

• Shareholders vs. Stakeholders
• Stakeholders Any group that is in some way
  affected by the companys decisions
• The company employees, customers, suppliers, the
  people who live in the community, etc.
• Board of Directors
• New board members are elected by the shareholders
  at the annual shareholders meeting.
• The board has the authority to make management
  changes as they see needed.
• Made up, idieally, of key individuals from
  outside the industry. One or two inside
  management members like the CEO or president of
  the company are on the board.
• Application Open sesame!
• Business ethical responsibility and globalization
  both most likely force Japanese boards to open up.

35
References

• Text of the Workshop ?????MBA??????Learning MBA
  Basics in English (March 2002, NHK)
  ????,?????????.
• Business Ethics Not an Oxymoron (UCLA
  Anderson Assets, Spring 2002).
• Trends in Japanese Management (2001, Palgrave)
  T. Kono and S. Clegg.
• Business Word Power Simply 400 (March 2002, NHK)
  ????.
• ??????????????(1997, ???) ?????.
• ???????????(1999, ???) ?????????????.

36
Business Administration vs Management

• Business Administration
• Administration of profit-oriented organizaitons
• Management
• Management/Administration of either profit- or
  non-profit-oriented organizaitons
• Public administration, art management, etc.

37
Undergraduate/Graduate Business Programs Abroad

• Hong Kong
• Hong Kong Universtity of Science and Technology
• U.S.A.
• Carnegie Mellon University
• France
• Bordeuax Business School

38
Firms in an Economic Perspective

• What is a Firm?
• A Microeconomic View by R. H. Corse, The
  Nature of the Firm, Economica, November, 1937)
• Managerial Economics An Economic Analysis of
  Corporate Decision-making